Thursday, October 17, 2013

Peña Nieto two for three on reform packages, as Mexico's House of Deputies easily passes tax bill

Guadalajara -
President Enrique Peña Nieto and his Institutional Revolutionary Party team are six weeks out from celebrating their first anniversary in office. Much of 2013 has been devoted to a triumvirate of proposed PRI reforms in the education, energy and tax arenas. So far Peña Nieto is batting impressively.

Education reforms, the first legislative step of which focused exclusively on teacher qualifications - teacher lack of qualifications might be more accurate - cleared both chambers of Mexico's congress by overwhelmingly majorities in early September, and were signed into law by the president a few days later. They were met by horrific resistance from a strident and at times violent educator's union, which still hasn't given up the ghost. But the reforms are now law, and there is absolutely no chance they will be rescinded. The majority of Mexico's professional teachers enthusiastically support them.

Energy reforms have been on deck since Sept. 23, and should come up for a senate vote soon. The principal one is constitutional in nature, and therefore more procedurally complex than an ordinary bill. It would open up Mexico's state controlled oil company, PEMEX, to private investment. That makes it highly controversial, since "private" is understood by everyone to mean foreign. PEMEX has been a government monopoly since 1938.

Today Mexico's lower legislative body, the house of deputies, approved by an easy margin of 317-164 parts of an ordinary tax bill which is the third component of the Peña Nieto reforms. The PRI president didn't get everything he had asked for, but easily enough to claim victory.

Deputies of Peña Nieto's own Institutional Revolutionary Party joined the solidly left wing Democratic Revolution Party (PRD), Partido Verde (the Green Party) and Nueva Alianza (New Alliance) to pass the tax proposals, while the conservative, center right National Action Party (PAN) joined the far left Movimiento Ciudadano (Citizens Movement) and Partido del Trabajo (Workers' Party). Those kinds of political alliances are not common in Mexico's multiparty system, and many were surprised by them.

The reforms include a tax increase of a peso per liter on soft drinks and carbonated beverages, of which Mexicans are purportedly the world's largest consumers. It was a revenue raising and public health measure, and particularly controversial for the latter reason.

Progressive individual income tax rates were also established on higher wage earners, as follows: On incomes over 500,000 pesos, 31%; on incomes over 750,000 pesos, 32%; on incomes of one to three million pesos, 34%; on incomes over three million, 35%. (As of Thursday, Oct. 17, the exchange rate was 12.8 pesos to the U.S. dollar).

But the real challenge the PRI administration is facing is to get more workers on the tax rolls, so that something, however modest, can be collected on their earnings. The majority of Mexicans (60%) still work in the informal economy, and pay little or nothing into the federal treasury. Enrique Peña Nieto announces plans to get more workers on payrolls.

An administration proposal to assess special federal taxes on rents, mortgage payments and a host of other sundry items went nowhere fast, and almost all were rejected by deputies.

Jan. 5, 2014 - U.K. report: life is getting harder, not easier for Mexicans

Energy reforms
Oct. 7 - López Obrador calls for public protest and civil disobedience over pending PEMEX reforms
Sept. 23 - Energy reform debate opens in Mexican Senate; warnings of foreign takeover of PEMEX
Sept. 21 - "The fix is in" on energy reform, says AMLO: new laws "designed for foreign business"
Sept. 20 - Without energy reform, Mexico will need more than half a century to reach U.S. output

Education reforms
Sept. 2 - Mexico's House of Deputies passes education reforms
Sept. 3 - Mexico's Senate passes education reform bill, as labor unions threaten civil disobedience

© MGRR 2013. All rights reserved. This article may be cited or briefly quoted with proper attribution or a hyperlink, but not reproduced without permission.

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